Outstanding student debt topped $1 trillion in the third quarter of 2013, and the share of loans delinquent 90 days or more rose to 11.8 percent, according to the Federal Reserve Bank of New York. By contrast, delinquencies for mortgage, credit card, and auto debt all have declined from their peaks.
One trillion dollars. That’s one hundred thousand million dollars. If all those dollar bills were laid end to end, it would reach all the way to how far you want to be from this situation.
Maybe you’re a student with a significant amount of education loans. Maybe you’re a parent carrying your son’s or daughter’s loan payments while they search for employment. Or, maybe you’re a newly graduated high school student who has just enrolled in a college and accepted the proffered financial aid package that contains student loans. If so, you’re just beginning your journey into student loan debt.
Regardless of your relationship to this student loan situation, it will affect you either directly or indirectly. Accordingly, President Barack Obama has taken action to make the situation more bearable for those students who are in debt for their educations. In a nutshell, here’s the president’s plan:
” … he’s expanding an existing program that prevents borrowers from having to pay more than 10 percent of their monthly income in student loan payments. That program is only available to people who borrowed during certain years, but Obama intends to expand the timeframe for eligibility.
Obama also plans to announce that he’s directing the government to renegotiate contracts with federal student loan servicers so encourage them to make it easier for borrowers to avoid defaulting on their loans.
And the president is going to ask the Treasury and Education departments to work with tax preparers to increase awareness about tuition tax credits and flexible repayment options.”
I searched for reaction to the president’s action but could find only responses from relatively high-profile commentators who may or may not have a political agenda to enhance by either criticizing Obama’s executive action (“He’s merely pandering to the youth vote prior to the November elections!”) or supporting it (“It’s about time someone took action on this crisis, since the gridlocked Congress seems incapable of doing so!”).
So, where to turn for some “real world” opinions about all this?
I took the initiative and started a discussion forum thread about the president’s plan on College Confidential. This generated a number of thoughtful comments from those who may have a closer proximity to the student loan reality than those political commentators. Here’s a sampling:
– On the surface this seems like a good step. I had not realized the 10% of pay was only for certain years that a loan originated. Expanding that seems fair. I do think you should pay until it is payed off though.
I am not in favor of a massive loan forgiveness program. I am not in favor of discharging loans in bankruptcy.
As long as people can go to community college and cheaper in state options to gain an education taxpayers should not have to carry these loan burdens of those with caviar tastes in education.
– Maybe I’m wrong…but I thought there was a tax implication for the forgiven loan amount at the end. In other words….it’s really not totally free.
– ^^^ This doesn’t seem like a forgiveness.
1. Expand program to limit payments. Could just cap payments, but you still have to pay off the total amount and you have interest accrue on the deferred amounts.
I doubt that if you don’t have a job for instance, that your payments are forgiven until you do
2. Direct government to renegotiate contracts. That sounds like political posturing. What if the other people say “no, don’t want to re-negotiate”?
3. Treasury dept to evaluate awareness… Ehhhhh…so
– Loan forgiveness typically creates “income” since it is a cancellation of debt that you actually owed. That means that you owe tax on it. If you don’t pay the tax (which often occurs, since the income isn’t associated with receiving cash), then you have an IRS problem, which is really bad, since they aren’t subject to the rules that commercial creditors are subject to.
– the government is problem here. the reason that tuition is so high is because the government guarantees student loans to everybody, so students take out loans they cant afford and get worthless liberal arts degrees. the colleges exploit the governments loan guarantees by raising tuition because they know students will go to college regardless (since they can take out loans and our education system encourages higher education). look at tuition before the government got involved, only thousands of dollars. the only way they can fix it is if they get out of the student loan market and so colleges will be forced to be more competitive in tuition and will prioritize efficiency and lower their prices instead of spending billions on pointless state of the art sports complexes.
– It’s not just student loans. Some folks find it fine to take out unaffordable loans for homes, cars, vacations…credit card debt.
I’m old enough to remember life before BankAmericard! It was harder to live beyond ones means because one didn’t have plastic to use for spending.
I think a personal finance course should be required in high school, and again in college. It’s fine to educate folks for their career.but I think it’s equally important for them to know how to deal,with the money they earn.
– Tuition wouldn’t be so high if the government had higher standards on who received student loans, tuition might be lower. But in any case, it is simply bad praactice to give everyone who needs loans a loan. Banks at least know this basic idea. Don’t give money to people who won’t pay you back.
– Yes, personal finances should be taught in high school and college, especially in high school. “Economics” may be a graduation requirement in some states, but it doesn’t touch upon the topics students actually need to learn. We are living in an era of complex financial systems, and even adults don’t fully understand the financial implications of, say, taking on a huge debt for a car or house.
As a student who spent most of his life abroad, I am still baffled that debt and “living beyond one’s means” are such prominent features of the U.S.
– The details of this issue are yet to be fully disclosed. So far it does not seem like its benefiting all students loans holders. According to MSN news on this issue, the requirements of borrowing after 2007 and not after 2011 is just questionable. I guess we will just have to see the full details as it unfolds. So, far I have come to know that nothing is REALLY free when it comes to students loans repayment in this country, no matter how the terms are twisted. SOMETHING always has to give.
So what’s your opinion? Let us know. That’s what the comment box below is for.
Be sure to check out all my admissions-related articles on College Confidential.